Sydney bubble unlikely to burst

Despite rapid growth in the Sydney market, a local buyer’s agent has said the city will continue appreciating into the future.

Record-low interest rates, a fast-growing population and severely restricted supply of land are pushing values higher and will underpin the market in coming years, Nick Viner from Buyer’s Domain said.

“The RBA has kept the official interest rate at a record low 2.5 per cent for almost a year now. Just last week, three of the big four banks dropped their fixed rates to record lows,” he said.

“Unlike many parts of the Western world, Sydney’s population is rising quickly.”

Urban Taskforce Australia projects 1.575 million people will move to Sydney in the next 20 years, he said.

In Mr Viner’s view, the city’s unique geography also drives prices higher, with available land limited by the ocean, the harbour and the Blue Mountains.

In addition, the supply of new homes has lagged behind other states.

“State government figures released this year estimate that Sydney will need more than 600,000 extra homes over the next two decades to cater for the rising population. Despite this, the rate of construction has lagged behind the increasing demand since the GFC,” he said.

Mr Viner believes the western suburbs are being particularly influenced by the rise of Parramatta as a second CBD, with more government agencies and businesses moving to the region.

“The “Parramatta factor” is unquestionably behind the record house prices now being achieved in the area,” he said.

In his opinion, while previous growth rates of over 17 per cent may ease, the market is unlikely to face a downturn while the above conditions are in play.